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Defense Contractor, 3 Managers Indicted In Fraud Case

October 28, 1987

SAN JOSE, Calif. (AP) _ A defense contractor and three of its managers have been charged with submitting fraudulent bills to the government totaling $774,604.

The indictment, handed up by a federal grand jury on Tuesday, accuses GTE Government Systems Inc. of 30 counts of ″making false and fraudulent statements and representations″ between November 1982 and April 1983.

GTE spokesman Frank Arneson declined comment until the Mountain View company has a chance to review the indictment.

U.S. Attorney Joseph Russoniello said his office decided to file criminal charges instead of suing to recover the funds. He said Defense Department probers ″were able to persuade us that the conduct was willful and intentional and clearly calculated to defraud.″

The maximum penalty for conviction on each count is five years in prison and a $10,000 fine.

The Mountain View company, part of GTE Corp. of Stamford, Conn., makes electronic gear for the military. It held $81 million in defense contracts in 1986.

The Defense Contract Audit Agency started the investigation in June 1983 when auditors spotted irregularities in GTE’s billing procedures and referred the matter to military investigators, said Thomas W. Sullivan, special agent in charge of the Defense Criminal Investigative Service.

Indicted were Stanley Paul, 57, John A. Stone, 41, and former official Robert M. Silver, 56.

Sullivan said investigators found the company improperly billed expenses on a project called ″TACJAM″ and other projects. TACJAM is a system that jams enemy communications.

The TACJAM contract was $24 million, but Sullivan said costs were ″somewhere around $70 million or $76 million″ when completed.

The indictment accused Stone and Silver of using false time cards listing fake hours employees supposedly worked on various projects.

Louis Kplan, a former quality assurance engineer at GTE, accused the company in a lawsuit three years ago of firing him after his ″refusal to mislead investigators″ for the Defense Department.

Kaplan declined to discuss his suit following the indictment, saying he had reached a private settlement with the company the prohibited him from talking about it. He said he knew of the grand jury probe, but hadn’t been asked to testify.

The prosecutor noted some contractors accused of submitting fraudulent bills to the government have been sued or ordered to repay the money. But he said his staff felt a need to prosecute the Mountain View company.

″Even though we are dependent on many of these ... defense contractors for the manufacture and production and providing of services essential to our defense capability,″ Russoniello said, ″we still cannot have a separate more tolerable rule for them when we’re looking at whether the government is getting all it’s paid for.″

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